Will Google Play Games?

With
Google
increasingly willing to explore areas beyond its search engine roots, I've started wondering: Is Google as a videogame publisher within the realm of possibility?

It's not as crazy as it might sound.

Google
already has its toes dipped in the gaming waters on a couple of fronts. "Google Lively," an avatar-based social interaction site, launched in July and appears to target "Second Life" players. And in March 2007, the Internet king acquired in-game advertising firm Adscape for $23 million.

So far, Google hasn't done much with either. After an initial surge, "Lively" users are minimal--and Adscape has been quiet since the takeover. But the understated nature of these divisions could be temporary.

"The way Google works is they try a lot of different things, and they're OK with putting out sub-par products initially to get things moving," says Colin Sebastian, senior vice president of equity research at Lazard Capital Markets. "People are pretty forgiving of that ... since they're good at upgrading their products."

For its part, Google has downplayed talk of entering the game publishing or development arenas. At a conference in July 2007, Bernie Stolar, Google's Dean of Games (and the former head of both
Sony
Computer Entertainment America and
Sega
of America), said the company was solely interested in the advertising potential of games--nothing else. The subsequent release of the virtual world "Lively" raises doubts and questions, though.

Is "Lively" meant to be a testing ground for a new delivery method for Adscape? Or is it more?

The paths Google could take to develop a bigger presence in the gaming industry are varied. With its financial war chest, the company could easily acquire one or several casual game development houses, using those to deliver in-game advertising via Adscape.

For instance, visitors to Pogo.com and RealArcade tend to be women over 35, and they are already used to seeing advertising with their games--sometimes particularly intrusive advertising. If Google were to introduce a more subtle style--similar to the AdSense ads it has been so successful with--it could prove appealing.

The company could just as easily acquire a top- or mid-tier developer and court the hardcore PC gamer. This group, typically males under 35, tends to resist in-game advertising, but might be more willing to put up with it in exchange for a free AAA game.

The U.S. Army took a similar approach with its game-cum-recruiting tool "America's Army" (which, some have argued, is a giant in-game ad itself). Since its 2002 launch, the game has signed up nearly 9.5 million players who have logged more than 233 million hours of play time--the equivalent of 26,614 years.

Google also has several existing technologies that could be used to create games. Imagine a flight simulator that uses Google Earth as a backdrop or tracking a spy in a major city via Google Maps' street view. While there would still be significant work required to create a game using these tools, the underlying technology is already fundamentally finished.

While most videogame makers rely heavily on brick and mortar retailers to drive sales (something Google isn't currently set up for), digital delivery is a rapidly growing industry. Valve Software has seen success with its Steam delivery system. And
Electronic Arts
has been pushing its online store more heavily in recent months. The money's not as good, but the growth potential is significant. And Google has the bankroll to wait for the growth to come.

"Given all the employees they have and the company's policy of encouraging side projects, I would be very surprised if there wasn't somebody in Google who's not approaching [gaming] as an opportunity," Sebastian says. "Of course, there are a number of hurdles that have to be cleared before it reaches the outside world."

It is, of course, entirely possible those hurdles will never be cleared in the publishing or development fields. But last week's release of the Chrome Web browser and upcoming plans to team with Family Guy creator Seth McFarlane to distribute a series of Web-based cartoon shorts show that Google is still very much in expansion mode.

There's no question the company wants a part of the $18 billion videogame industry. The real question is: What is it planning to do to get it?